SICC disallowed application to partially set aside SIAC arbitral award

In the case of CJM v CJT [2021] SGHC(I) 4, the plaintiffs sought to set aside four paragraphs of the Tribunal’s award (the “Award”), on grounds that they were made in excess of the parties’ submission to arbitration, in breach of the rules of natural justice and contrary to the public policy of Singapore.

The parties entered into the Share Purchase and Shareholders’ Agreement that included a component known as the “Earn-Out Payment”. This payment was dependent on the Company’s EBITDA for the financial year (“FY”) 2021. If the Company had a negative EBITDA in FY 2021, there would be no Earn-Out Payment.

Subsequently, the plaintiffs commenced an SIAC arbitration claiming damages for loss of the Earn-Out Payment, on the basis that the respondent had breached its good faith obligation by running down the Company, thereby destroying the Company’s EBITDA for FY 2021 and the prospects of an Earn-Out Payment.

Even though the Tribunal found that the respondent had breached its good faith obligation, it held that the claimant had failed to prove causation and quantification of actual loss. In particular, it ruled that the claimants had not shown that the Company’s failure to pursue the tender opportunities resulted in a negative EBITDA. Accordingly, the Tribunal concluded that the claimant had failed to show that the respondent’s breach had occasioned loss of the Earn-Out Payment.

The SICC’s Decision
Thereafter, the plaintiffs/claimants sought to set aside this part of the Award as the Tribunal decided on the issue of causation and quantification of actual loss, when this issue was not before the Tribunal. The plaintiffs’ argued that their case was not premised on actual loss; but thoes damages were to be quantified based on the EBITDA for FY 2021 as projected in the business plan. Therefore, it claimed that the Tribunal’s findings were made in excess of the parties’ submission to arbitration, in breach of the rules of natural justice and contrary to the public policy of Singapore.

The Court found no basis to set aside any of the impugned paragraphs of the Award. The issue of causation and quantification of actual loss was squarely before the Tribunal - From the plaintiffs’ pleading, it was apparent that the plaintiffs recognised that they needed to show causation. Accordingly, the Court found that the Tribunal did not exceed its jurisdiction and was instead tackling an issue on which the plaintiffs had ample opportunity to respond.